The Difference Between the International Monetary Fund and the World Bank

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The primary difference between the International Monetary Fund, or IMF, and the World Bank lies in their respective purposes and functions. The IMF exists primarily to stabilize exchange rates, while the World Bank’s goal is to reduce poverty. Both organizations were established as part of the Bretton Woods Agreement in 1945.

The International Monetary Fund promotes monetary cooperation internationally and offers advice and assistance to facilitate building and maintaining a country’s economy. The IMF also provides loans and helps countries develop policy programs that solve balance of payment problems if a country cannot obtain financing sufficient to meet its international obligations. The loans offered by the IMF, however, are loaded with conditions. Often, a loan provided by the IMF as a form of „rescue“ for countries in serious debt ultimately only stabilizes international trade and eventually results in the country repaying the loan at rather hefty interest rates. For this reason, the IMF has many critics worldwide.

The World Bank’s purpose is to aid long-term economic development and reduce poverty in developing countries. It accomplishes this by making technical and financial support available to countries. The bank initially focused on rebuilding infrastructure in Western Europe following World War II and then turned its operational focus to developing countries. World Bank support helps countries reform inefficient economic sectors and implement specific projects, such as building health centers and schools or making clean water and electricity more widely available. World Bank assistance is typically long-term, funded by countries that are members of the bank through the issuing of bonds. The bank’s loans, however, are not used as a type of bailout, as in IMF style, but as a fund for projects that help develop an underdeveloped or emerging market nation and make it more productive economically. According to the World Bank’s annual report for 2016, the World Bank distributed around $64.2 billion in grants, loans, guarantees and equity investments in 2015.

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